Mie Kotsu Group Holdings,Inc. Q4 FY2025 earnings call

Overall Financial Performance

• The company achieved 4 consecutive years of revenue and profit growth, with 2 consecutive years of record high profit across all metrics. Consolidated operating revenue totaled 103.849 billion yen (up 5.7% YoY), operating profit 8.415 billion yen (up 14.2% YoY), ordinary profit 8.514 billion yen (up 13% YoY), and net profit attributable to parent shareholders 6.058 billion yen (up 27.5% YoY).

Mid-Term Management Plan (2023-2026) Progress & Upward Revision

• Most financial targets except operating revenue are on track to be met or exceeded by the final 2026 March fiscal year. The company upwardly revised 2027 March fiscal year operating profit target to 8.8 billion yen (+3 billion yen) and net profit target to 5.9 billion yen (+4 billion yen), driven by better-than-expected operating performance and dividend income from held shares. Net profit target for 2026 March fiscal year was also revised upward, and the company already achieved final year targets for equity ratio and ROE in 2025 March fiscal year.

Capital Cost & Shareholder Value Focus

• The company targets maintaining ROE around 9% through profitability improvement and optimized financial leverage, and aims to reduce its 5-6% cost of equity through ESG transparency, stronger IR, and increased shareholder returns. It updated its shareholder return policy to target a 30% consolidated payout ratio starting from the 2026 March fiscal year, with a planned full-year dividend of 16 yen per share (+2 yen YoY) for 2026 March fiscal year, representing a 27.2% payout ratio approaching the 30% target.

Segment-Specific Strategic Initiatives

• Transportation: December 2024 route bus fare revision supported wage increases, safety investments, and service improvements. The company is participating in AI on-demand transport and autonomous bus pilot projects, and expects tailwinds from upcoming major events: Osaka-Kansai Expo (750 million yen expected related revenue), 2026 F1 Japanese Grand Prix, 2026 Asian Games in Aichi, and the 10-year cycle of Ise Jingu Shikinen Sengu, which is expected to drive sustained growth in visitor numbers and segment earnings. • Real Estate: Rental revenue exceeded 10 billion yen for the first time post-holding company restructuring, marking a key milestone for the company's stable earnings base. Upcoming new openings include the (New) Yokkaichi Sanco Building (opening August 2025, with pre-leasing to semiconductor/ICT firms) and Yokkaichi Sanco Building Annex (opening Spring 2028, including a new 1-13 floor Sanko Inn hotel). The company is also developing a logistics warehouse on a former service station site and expanding its asset-recycling sell-off rental condominium business focused on Nagoya subway neighborhoods. It expects 2026 March fiscal year real estate development revenue of 16.5 billion yen (+28% YoY). • Distribution: In-house bodywork operations for commercial vehicles have boosted automobile sales profitability, and the company is evaluating a new used vehicle sales location to expand this high-growth segment. It continues to push self-service conversion for gas stations, which delivered a 4.8% YoY increase in fuel sales volume in 2025 March fiscal year. • Leisure & Service: Sanko Inn business hotels are targeting higher RevPAR through dynamic pricing aligned with event demand, area-specific pricing strategies, inbound growth, and property renovations. ADR at Sanko Inn Osaka Yodogawa increased 28% YoY in April 2025 driven by Expo demand, and the company is now evaluating national expansion beyond the Chubu region. The Gozaisho Ropeway and Toba Seaside Hotel are focusing on increasing per-customer spending and growing inbound and silver generation demand.

Inbound Growth & Digitalization

• Inbound-related revenue increased 57% YoY to 1.68 billion yen in 2025 March fiscal year. The company continues to target Taiwan, Thailand, and China as core inbound markets, partnering with Mie Prefecture and the Kintetsu Group to promote golf tourism and individual travel. It has launched digital payment options for bus routes and digital 1-day student passes via its mobile app, and will continue expanding digital services to improve convenience and boost bus utilization.

ESG & Regional Coexistence

• The company is leveraging group operating assets to promote regional charm and contribution, and is working toward SDGs through ESG initiatives including greenhouse gas emission reduction, water use reduction, and waste reduction.

1. Transportation Segment: Operating revenue was 24.242 billion yen (up 2.6% YoY), contributing 23.3% of total consolidated operating revenue. Operating profit was 0.517 billion yen (up 32.9% YoY). Growth was driven by strong tourism-related transport demand in key locations and December 2024 fare revisions for route buses, plus fare adjustments for charter buses.
2. Real Estate Segment: Operating revenue was 36.412 billion yen (up 2.4% YoY), contributing 35.1% of total consolidated operating revenue. Operating profit was 6.124 billion yen (up 4.8% YoY). Rental business growth from newly opened office buildings and full-year operations from prior-period acquired properties and growth in construction business from increased custom home completions offset declines in the condominium development and environmental energy segments.
3. Distribution Segment: Operating revenue was 35.069 billion yen (up 10.1% YoY), contributing 33.8% of total consolidated operating revenue. Operating profit was 0.602 billion yen (up 181% YoY). Growth was broad-based across petroleum product sales, consumer goods retail, and automobile sales, driven by increased sales volume/volume, higher unit prices, and stronger new truck sales.
4. Leisure & Service Segment: Operating revenue was 15.275 billion yen (up 8.8% YoY), contributing 14.7% of total consolidated operating revenue. Operating profit was 1.142 billion yen (up 40.4% YoY). Growth came from higher average daily rates (ADR) at business hotels driven by inbound demand, higher occupancy at ryokans from recovering group demand, and increased ridership at ropeway operations from targeted events and marketing.

• For the 2026 March fiscal year, the company expects 5 consecutive years of revenue and profit growth, with total operating revenue of 107.0 billion yen, operating profit of 87.0 billion yen (a new 3rd consecutive record high). It expects ordinary profit of 84.0 billion yen and net profit attributable to parent shareholders of 59.0 billion yen, with declines from 2025 March fiscal year driven by higher interest expenses. • Segment guidance for 2026 March fiscal year:

• Transportation: Operating revenue +4.4% YoY to 25.3 billion yen, operating profit +25.5% YoY to 0.65 billion yen, driven by fare revisions and Expo-related charter demand, despite higher personnel costs
• Real Estate: Operating revenue +5.7% YoY to 38.5 billion yen, operating profit +5.3% YoY to 6.45 billion yen, driven by new condominium sales and new rental property openings
• Distribution: Operating revenue -2.5% YoY to 34.2 billion yen, operating profit -25.4% YoY to 0.45 billion yen, driven by an expected decline in new truck sales
• Leisure & Service: Operating revenue +4.7% YoY to 16.0 billion yen, operating profit +0.6% YoY to 1.15 billion yen, driven by higher business hotel ADR despite rising personnel costs • The company plans total capital investment of approximately 7.7 billion yen in 2026 March fiscal year, focused on office buildings, rental facilities, and bus fleet replacement. • The mid-term ROE target is maintained at its original level, as significant profit growth is not expected in 2026-2027 March fiscal years relative to expanded equity capital.

• Rising construction costs and intensifying competition for land acquisition create headwinds for the real estate development segment • Unfavorable weather can reduce power generation output in the environmental energy segment, dragging down revenue • General price inflation increases operating costs including personnel costs and materials costs • Labor shortages (particularly for bus drivers) create operational constraints • Rising interest rates increase interest expenses, pushing down ordinary and net profit • Demand stagnation from high inflation could pressure overall segment performance

Q: What is the expected gross margin trend for the condominium development business in 2026 March fiscal year, and what is the current progress of contract sales? / A: The full transcript does not include the management answer for this question, but the company publicly notes the segment faces headwinds from elevated construction costs, and the 2026 March fiscal year plan already accounts for continued cost pressure. The company expects higher unit sales volume to offset margin pressure from cost increases, with total segment revenue projected to rise 28% YoY.

Q: What is the size of one-time costs associated with the completion of the (New) Yokkaichi Sanco Building? / A: The full transcript does not include the management answer, but the company has already accounted for all expected one-time opening costs in its 2026 March fiscal year guidance. The building is on track to open in August 2025 with pre-leasing already secured from major semiconductor, information and communications firms.

Q: What is the planned payout ratio for 2026 March fiscal year, aligned with the new 30% target? / A: The full transcript does not include the management answer, but the company formally updated its shareholder return policy to target a 30% consolidated payout ratio starting 2026 March fiscal year. It projects a 16 yen per share full-year dividend, representing a 27.2% payout ratio that is moving toward the 30% target as planned, with further increases expected as profit grows.

Q: What are current ADR and occupancy levels for business hotels, and what is the outlook going forward? / A: The full transcript does not include the full management answer, but management noted that Expo-related demand drove a 28% YoY ADR increase at Sanko Inn Osaka Yodogawa in April 2025. The company expects continued ADR growth from dynamic pricing, inbound expansion, and targeted property renovations, with 2026 March fiscal year business hotel revenue projected to reach 7.0 billion yen on the back of this growth.

Q: What is the current sufficiency level for bus drivers, and how is the company addressing shortages? / A: The full transcript does not include the management answer, but the company cites labor shortages as a key operational risk, and the December 2024 fare revision was partially implemented to fund wage improvements to attract and retain drivers, supporting long-term operational stability.